KUCHING: Nestle (Malaysia) Bhd’s (Nestle) first quarter of 2016 (1Q16) results have impressed some analysts given the group’s unprecedented profit.
In a filing on Bursa Malaysia, Nestle noted that from a profit perspective, gross profit increased from RM498 million to RM521 million, a growth of 4.6 per cent versus the corresponding period last year.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Nestle’s first three months of 2016 (3M16) net profit of RM220.7 million (up 17.5 per cent) was above expectations, accounting for 33.5 per cent of its in-house forecast and 34.7 per cent of the consensus.
The positive deviation can be attributed to higher-than-expected margin driven by low raw material prices and operating efficiency.
Meanwhile, Nestle’s 1Q16 net profit accounted for 36 per cent/35 per cent of the research arm of Maybank Investment Bank Bhd’s (Maybank IB Research) and consensus full-year estimates.
“The results are in line, for we expect marketing expenses and the group’s effective tax rate to normalize higher in the coming quarters,” Maybank IB Research said.
Similarly, Nestle’s results were in line with Affin Hwang Investment Bank Bhd’s (Affin Hwang) and consensus expectations, making up 35 per cent of the full-year forecasts.
It noted that first-quarter results are seasonally stronger, and have historically accounted for 33 per cent of full-year earnings (on average over five years).
That said, Kenanga Research ws impressed by the set of results as it marked an unprecedented net profit level of above RM200 million for the group.
“The growth was comprehensive with both top line and bottom line growth as the group’s strategy in reinvesting the savings from raw material cost bore fruits,” the research arm said.
Kenanga Research expected the momentum to be sustained with the continuous effort in marketing as well as improving operating efficiency.
Moving forward, the research arm foresees the subdued trend of commodity price to continue in view of the lacklustre global economy outlook and thus expecting the group to continue benefiting from that trend.
“We also anticipate the group to stay committed in marketing and promotional activities in order to stimulate consumer sentiment and encourage spending,” it added.
On the other hand, Maybank IB Research believed that topline growth for current year 2016 (CY16) in the domestic market will be mainly supported by volumesand new product launches as Nestle’s strategy of maintaining product prices to capture market share remains.
The research arm noted that export sales should also pick up-Nestle sees export potential from ready to drink (RTD), confectionary, coffee and noodle products.
“Gross margins should remain healthy into the next few quarters on generally more favourableraw material prices, although partially offset by ringgit weakness against the US dollar.
“To note, Nestle imports about 50 per cent of its raw material requirement,” the research arm said.